Stock trading dynamics and pedestrian counterflows: Analogies and differences

Zhenpeng Tang, Meng Ran and Yongxiang Zhao

The North American Journal of Economics and Finance, 2020, vol. 54, issue C

Abstract: This paper contrasts stock trading dynamics with pedestrian counterflow movements. We apply the social force model built on pedestrian movement patterns to examine micro characteristics of the Chinese stock market. Utilizing one-minute high frequency stock trading data of the Shanghai Composite Index between 2014 and 2017, we find that stock trading dynamics under loose, prudent and austerity monetary policies closely resemble pedestrian movement patterns under wide, moderate, and narrow door width, respectively. In addition, we find that stock trading patterns with unbalanced buyers and sellers correspond to pedestrian counterflows with unbalanced flows from one side of the door to the other. Our results also show that stock trading patterns under various trading volumes are similar to pedestrian counterflows with different flow rates. In general, our results indicate that stock trading patterns are influenced by investor behaviors and conflicting interests similar to those present in the social force model of pedestrian counterflows. Thus, examining the behavioral mechanism at play in these self-driven systems will generate important insights for the behavioral foundation of financial markets.

Keywords: Stock price dynamics; Pedestrian counterflows; Social force model (search for similar items in EconPapers)
JEL-codes: C15 C32 G10 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:54:y:2020:i:c:s1062940818305205

DOI: 10.1016/j.najef.2019.101015

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